5 things to know about Michigan's wage raise

LANSING — Gov. Rick Snyder signed legislation Tuesday to raise the state's minimum wage to $9.25 an hour by 2018, as Republicans controlling the state government moved to head off a November ballot measure that could have raised pay even more. Here are five things to know about the effect on Michigan workers and the ballot drive:

Gradual Raise

The Republican governor approved a 25 percent wage raise from the current hourly minimum of $7.40, but Michigan workers won't see the increase all at once. The first bump comes in September, when the minimum wage moves up to $8.15. From there, it increases to $8.50 on Jan. 1, 2016; to $8.90 on Jan. 1, 2017; and to $9.25 on Jan. 1, 2018.

Lawmakers said the gradual increase is better for employers who might need time to adjust to paying employees more.

Some other states that have raised their minimum wages this year are using a similar gradual method, but none will rise as slowly as Michigan's wage. Maryland is increasing from $7.25 to $10.10 by July 2018, and Minnesota will go from $6.15 to $9.50 for large employers and from $5.25 to $7.75 for small employers by August 2016, according to the National Conference of State Legislatures.

If current inflation trends continue, $9.25 will only be worth about $8.50 by 2018, said Charles Ballard, an economics professor at Michigan State University. A minimum-wage earner would need to make about $8 an hour in 2018 to be making relatively the same as $7.40 today, he said, citing U.S. Bureau of Labor Statistics data.

Ballot drive

Michigan is the first state with a Republican-led legislature to raise its minimum wage this year. That's because Republican leaders in Michigan were working to pre-empt a ballot initiative they said was a worse alternative: raising the minimum wage to $10.10 an hour by 2017. Senate Majority Leader Randy Richardville, R-Monroe, said he introduced the bill to repeal and replace the law that the ballot initiative aims to amend.

But it is unclear if the new law will prevent the $10.10 measure from appearing on the November ballot. Raise Michigan, the group of labor and community organizers behind the ballot drive, submitted 319,784 petition signatures in support of the ballot initiative by the filing deadline Wednesday.

Raise Michigan attorney Mark Brewer, former chair of the Michigan Democratic Party, said according to the state Constitution, the Michigan Secretary of State's office must now review the signatures and follow the usual ballot process because it is a "valid" drive approved by the state Board of Canvassers. He wouldn't say whether Raise Michigan plans to sue the state.

"We will do whatever's necessary to protect the peoples' right in this state to pursue an initiative," he said.

Who's affected

In 2013, 96,000 Michigan workers were earning at or below the minimum wage, according to the Michigan Department of Technology, Management & Budget. That's 3.8 percent of Michigan's roughly 2.5 million hourly workers. Nationally, about 4.3 percent of hourly workers make minimum wage.

The minimum wage raise could also help hourly workers who make above minimum wage, since employers are likely to adjust their pay scales to reflect a new minimum.

The $9.25 wage would not lift a family of three above the federal poverty level, said Yannet Lathrop, policy analyst for the Michigan League for Public Policy, an advocacy group for the poor. MLPP said households headed by women will especially benefit from the raise, since women make up about 53 percent of the state's low-wage workforce compared to 48 percent of the overall workforce.

Rising with inflation

Democrats and minimum wage advocates secured a victory by tying the minimum wage to inflation in the new law. The wage will increase annually with inflation by up to 3.5 percent starting in 2019, unless state unemployment is 8.5 percent or more in the previous year.

The measure, which Democrats have sought for years, will limit the need for future legislative battles over raising the wage.

Tipped workers

The law increases the hourly minimum for workers who get tips to 38 percent of the general minimum wage, from $2.65 currently, to $3.52.

A major catalyst for Republican efforts to block the ballot drive was that it would eliminate the tipped wage scale and apply the $10.10 minimum to all workers.

The Michigan Restaurant Association, National Federation of Independent Business and other groups said any wage hike would cut into business profits, which could cause closures and layoffs. But they said eliminating the separate payment scale for tipped workers would have been especially "devastating."